The EUR/USD has yet to break above the 1.3760 this morning, with the 100-hour moving average creating a strong barrier to euro upside at the moment. The lows around 1.3730 are also holding firm, giving little shorter-term trading opportunity.
Having failed to approach the 1.3833 highs of late October and only just managing to touch the 1.38 level before staging a retreat, it’s clear that traders are unwilling to commit to direction until clarity is gleaned from the US Federal Reserve.
A move through 1.3833 is likely run into trouble at the 2008 downtrend resistance level around 1.3920, while on the downside the 1.3620 level appears to be the key to supporting the single currency.
Both the manufacturing and services flash purchasing managers index (PMI) data for France were something of a let-down this morning, failing to meet what were already fairly modest expectations. The manufacturing data showed the worst contraction in six months, serving to highlight the slowdown in what was once perceived to be a core country in the eurozone. This may spur the European Central Bank into more decisive action with respect to monetary policy in the coming quarter.
In sharp contrast to the weak French numbers, German flash PMI saw its manufacturing sector expand for the eighth month, rising to 54.2 versus the 53.0 expected. Services data failed to meet expectations coming in at 54.0 against a consensus forecast of 55.3, but was still a comparatively strong figure leaving the country firmly in expansion territory.
US Empire manufacturing due out later this afternoon is expected to improve to 4.9 from the big fall seen of -2.2 seen last month. Manufacturing PMI is also expected to show a boost on last month’s number with 54.9 expected.
Industrial production – a leading indicator of economic health – declined by 0.1% in November; consensus is for an increase of 0.6% this time around.
The jury is out on a ‘Dectaper’ but one could expect that, should US data exceed expectations, many will ramp up the US dollar bullishness today.